Overview
(1.5 Hours — Setting the Structural & Commercial Baseline)
- Strategic Drivers & Applications:
- Fundamental rationale: Volatility dampening, balance sheet capital relief, and tail-risk protection.
- Direct insurance applications (commercial umbrella, excess casualty layers) vs. Reinsurance structures (Risk XL, Cat XL).
- Layering Architecture & Attachment Setting:
- Setting attachment points and layer limits;
- How to create layers
- Aggregate Policy Limits vs. Reinstatements:
- The conceptual divide: Direct policy aggregate limits versus reinsurance treaty reinstatements.
- Mechanics of reinstatements: Free vs. paid reinstatements; calculating reinstatement premiums; maximum annual treaty recovery ceilings.
- Exposure Bases & GNPI Mechanics:
- Definition and role of Gross Net Premium Income (GNPI)
- Standard and allowable deductions (returns, cancellations, statutory charges, local brokerages).
- Rate on Line (ROL) vs. Burning Cost rates; Minimum and Deposit (M&D) premiums and year-end audit adjustments.
(1.5 Hours — Empirical Burning Cost Analysis & Volatility Loading)
- Direct Insurance vs. Reinsurance Nuances:
- Ground-up direct liability excess rating versus non-proportional treaty structures (Per Risk XL vs. Catastrophe XL).
- Data Cleansing & Historical Adjustments:
- On-level premium adjustments and exposure base normalization.
- Developing losses to ultimate (IBNR and IBNER development factors).
- Trending historical claims
- Burning Cost Calculation & Derivation:
- Step-by-step burning cost derivation across historical loss-free and loss-hit years.
- Handling shock losses, and credibility weighting between layer experience and market benchmarks.
- Rate Formulation & Commercial Loadings:
- Converting pure burning cost to market-clearing rates; loading for parameter uncertainty, frequency spikes, and capital charge.
(1.5 Hours — Benchmark Curves, First-Loss Scales & Cat Modeling)
- Concept & Strategic Role of Exposure Rating:
- Overcoming thin or non-existent loss experience in high-attachment layers; pricing based on portfolio exposure profiles.
- Direct Liability Layering via Increased Limit Factors (ILFs):
- Mathematical structure and properties of ILF curves
- Pricing umbrella and commercial excess casualty layers above primary underlying limits.
- Property Per Risk XL & CAT XL Exposure Rating:
- Principles of first-loss scales .
- Using Risk Profiles to price layers.
- Catastrophe XL Exposure Fundamentals:
- Interpreting vendor catastrophe model outputs (RMS, AIR/Verisk).
